The table is tilted, the dice are loaded, the cards are marked, but the game goes on.

Euroland: Will the Netherlands Be the Next Domino To Fall?

By Servaas Storm, a Dutch economist and author, and cross-posted from Naked Capitalism

Austerity has nurtured resentments that will likely make the populist right PVV the biggest winner in the March 17 election — but without the majority or the allies needed to govern.

The Dutch go to the polls on March 15, a few weeks ahead of the French vote to choose the successor to Président François Hollande and well before Bundeskanzlerin Angela Merkel seeks a fourth term in September. The Dutch vote takes on a wider European significance, however, because Dutch voters — who rebelled against a EU ‘constitution’ in 2005 and last year rejected the association treaty between the EU and Ukraine in a referendum — have in the past proved to be a good gauge of European sentiment.

This time, there is a strong anti-‘politics-as-usual’ sentiment blowing across the Netherlands, which—through a voter swing to the right—may set the country on the anti-establishment path blazed by Brexit and Trump. The Dutch populist insurgency is led by the far-right anti-Islam Freedom Party (PVV) of MP Geert Wilders, who wants to scrap the euro, break up the Eurozone, and restore border checks in the EU. Wilders’ PVV is a single-member party, the only member being its leader who alone decides its program and positions, and selects the names on the party’s electoral list.

The party program, written on one side of a single sheet of paper, centers mostly on stopping migration, fighting the ‘Islamization of Europe,’ and freeing the Dutch from the shackles of the Brussels bureaucracy and the Frankfurt-based ECB. Wilders has without doubt benefited from the same factors that have buoyed populists elsewhere in recent years: the incapacity to resolve the Eurozone crisis; growing concerns about ‘mass’ migration, ‘failing’ integration and the ‘refugee crisis’; terrorist attacks; and the failure of center-left parties to deliver the outcomes to which their traditional constituencies aspire, most prominently decent and stable employment. The PVV has been leading in the polls for months and will most likely emerge as the big winner of the 2017 elections—making Wilders the prime candidate to form a (coalition) government.

This populist insurgency and anti-establishment ‘revolt’ are remarkable in an economy which, going by all the usual macroeconomic indicators and notwithstanding the deep crisis in most of the Eurozone, appears from the outside to be in steady good health. Dutch economic growth has stabilized at around 2% in 2015 and 2016, which is also the predicted growth rate for 2017. Dutch living standards are high (on average); the official unemployment rate is down to 5.4% of the labor force; inflation is low; and the country continues to enjoy a huge net export surplus (of 9% of GDP). Recovery is so robust that De Nederlandsche Bank has probably been the only central bank in the world that has been calling for higher wages—in the domestic services sector sheltered from international competition, which employs 46% of Dutch workers.[1]

While private (household) debt is high, the Dutch hold large stocks of savings in their (capital-based) pension system, which is considered robust enough to cope with its ageing population. The government budget deficit is under control (at less than 1% of GDP), while the public debt-to-GDP ratio has come down to 63% and is manageable, also because the Dutch state can borrow at almost zero interest rates in bond markets. Hence, while the economy has stabilized, Dutch politics looks set to destabilize: Never before has the outcome of elections in the Netherlands been as difficult to predict as this March 15, when 12.6 million voters cast ballots to usher in a new 150-member Lower House. Might the Netherlands, an EU founding member, be the next domino to fall to populism and euro-skepticism, provoking a disintegration of the entire EU?…